Blockware Research Spotlight — Institutional Investment Driving the 2019 Bitcoin Rally
Institutions invest most heavily in the early stages of Bull Markets, while Retail participation is minimal until the later stages. You always want to follow the Institutional “smart money” as it is the big money that moves the market. The data below suggests that the move in Bitcoin from $3,200 to $13,800, in 2019, was driven by institutional money, while retail money has remained on the sidelines. We are market historians and a characteristic of every early Bull Market is heavy institutional accumulation during the first ⅓ of the Bull Market — we are presently witnessing this through the data below:
- Trading Volume — CME Bitcoin Futures volume dwarfs volume on Retail Exchanges during Q1-Q2 and continues to outpace in Q3.
- Bitcoins growing market dominance vs ALT’s
- The number of Bitcoin wallets holding at least 10 BTC makes a new all-time-high
Bitcoin Trading Volume Signals Institutional Participation
CME Bitcoin Futures are solely traded by institutional investors. Each CME Bitcoin Future Contract is equal to 5 Bitcoins: to trade the minimum 1 Contract it will cost approximately $45,000. The product is designed specifically for institutions. Therefore, examining the trading volume on the CME Bitcoin Futures can provide valuable information regarding institutional participation in Bitcoin. In 2019, the volume of Bitcoin Futures traded has grown significantly while Bitcoin volumes on retail exchanges like Coinbase and Bitfinex remain well below 2018 levels. Year-to-date, Bitcoin Futures are averaging 7,237 contracts (36,185 Bitcoin) per day, a 132% increase from the same period last year, suggesting growing Institutional participation in 2019 while Retail investors have remained on the sidelines.
Considering the volume traded on the CME Futures was significantly greater than the volume traded on retail exchanges like Coinbase and Bitfinex throughout 2019, we can conclude that the dollar flow into Bitcoin was led by institutions. The chart below displays the volume of Bitcoin traded on the CME Futures, Coinbase, and Bitfinex since Q4, 2017:
Notice how retail volumes were highest at the market peak in late 2017 and early 2018. This is a common characteristic of a market top. Conversely, we see CME volumes (institutional participation) steadily increasing since late 2018. In Quarter 2 and Quarter 3 of 2019, CME Futures volume have overtaken Coinbase & Bitfinex, again illustrating that the 2019 Bitcoin rally has been disproportionally driven by Institutions. This divergence between Institutional and Retail Investors also suggests that it is still early in the Bull Market Cycle.
Blockware Solutions’ CEO, Matt D’Souza, expanded on this research while presenting his take on the current Macro Trends impacting Bitcoin at Consensys and EpiCenter’s Macro.WTF Event as part of San Francisco Blockchain Week presented by EpiCenter. Matt D’Souza also participated in a research panel with other industry notables such as:
- Polychain Capital
- Protos Asset Management
- Castle Island
- Gabriel Jimenez — creator of the Petro
More insights to come next week as we examine Bitcoin’s growing Market Dominance, as well as the Macro-Economic case for Bitcoin and our expectations on the effects of the upcoming Halving.
Blockware Solutions, LLC is a Blockchain Service Provider and industry leader in Bitcoin & Cryptocurrency Mining Services. Assisting clients with the acquisition & sale of mining rigs direct from foreign manufacturers and through trusted P2P domestic channels. Blockware provides access to a thoroughly vetted network of hosting & colocation facilities across the US. Additionally, Blockware Solutions is a professional mining pool operator and provides research & consulting services on a variety of other opportunities in the Blockchain and Cryptocurrency Mining Space. We are currently operationalizing on a $10 million mining fund to deploy 10 MW of self-mining equipment.
Blockware is a team with professional experience in Director Level Corporate Finance, Proprietary FX Trading, and Management Consulting. Co-Founder Matt D’Souza currently manages Blockchain Opportunity Fund, LLC: a mid-large size hedge fund focused solely on digital assets and the blockchain space.
Blockware Solutions presently operates one of the largest Validators for the Loom Network, and has recently launched a US-Based Bitcoin Pool. We are consistently positioning for new ways to actively support growing blockchain ecosystems.
For direct comments or questions, email us at Contact@BlockwareSolutions.com
Co-Authored by: Sam Chwarzynski, Matt D’Souza, Mason Jappa, and Jason Zaluski
This is NOT INVESTMENT ADVICE